management bonuses

just wondering how everyone handles it when a manager does not meet required percentages for food cost and labor cost? whether it be weekly or monthly, how much do you reduce the bonus or should the bonus not be tied to percentages? do you just give a bonus because they make your life easier and dont have to work as much?

I currently pay my manager a bonus based off of 4 category’s on a monthly cycle. Each one is a pass/fail type of bonus. Either they meet it and get the full bonus or they fail, and get nothing for that category.

The Two main category’s that i see for a pizza place is Food Cost then Labor Cost. The other 2 that i pay on are for area’s that i see as useful to keeping the store running correctly, but not necessary per say to running the store. It is my way of showing them that i appreciate the extra effort in keeping the store the way i want, and keeping our customers happy. Because let’s face it, without happy customers we would not be in business.

I thought about the food category for quite sometime, and i settled on what my POS says my ideal % should have been, and what the actual % was to determine if it was meet or not. I did this because setting a arbitrary % (say 29%) is completely out of control of the manager, UNLESS they set the pricing and coupons. Yes they can guide the percentage by knowing what to upsell and how to steer customers into the coupons that make us money, AND keeping my employee’s aware of and on top of doing the same.

Honestly tho, if i am doing my job right, my manager is doing their job right and should be getting the full bonus every month. Currently my manager average’s 3 of 4 each month, but last month they made all 4. (If you had not guessed it was the food cost we were missing. I adjusted my pricing and did retraining with everyone in the store, still have a ways to go, but we are getting back to where we should be.)

In addition to where we are in total sales and food cost and labor cost, I include shop cleanliness and maintenance, service levels (door time), cash handling (both over/short and all the daily stuff like cash paid outs) and a general thing I call “smooth operations”. It is not based on solid percentages. We have a conversation each pay period on how things are going and touch on each area especially if there is an issue.

We pay bonuses on every pay period. Bonuses are higher when we are busy and smaller in our off-seasons. The max high season bonus for the GM this past winter was $8 per hour. (I do not count overtime hours for bonus calculation) The minimum low season bonus would be about $3.50 per hour. A typical bonus throughout the year for the GM is $5 per hour. I have told them that if the bonus is ever less than $3 per hour they need to come ask me what is wrong!

I currently do not employ a General Manager, but have set up what I find to be a fair (based on my experience as a General Manager) bonus structure. General Managers will be eligible for 1% of Net Sales or 10% of Net Profit, whichever is greater. Assistant Managers will be eligible for .5% of Net Sales or 5% of Net Profit, whichever is greater. They will get 25% of the eligible bonus for each area they are within target on:

Labor - Must be within .5% of target labor based on sales volume.
Food Cost - Must be within (over or under) 1% of target food useage based on inventory count
Comp Sales - Must be at least 1% over last years sales
OTD Times - Average OTD time must be less than Target Time based on trade area

Any cash shortages that are unaccounted for will be taken out of any eligible bonus. If no bonus is eligible it will carry over until their next eligible bonus.